The invention relates generally to personal cards, such as credit cards, and more particularly, to personal cards featuring electronics for authenticating transactions in which the cards are used.
Fraudulent use of personalized cards such as credit cards, debit cards, identification cards and the like is a serious problem. For example, credit card fraud causes at least an estimated $1 billion each year in losses in the United States alone. This fraud not only affects the credit card companies but, more importantly, the consumers who wind up paying for the fraud by way of higher finance charges, annual fees, and increased costs for law enforcement.
Credit cards have, at best, low-level security features built in. If a credit card is stolen, and the loss of the credit card is not reported for deactivation, the stolen credit cards can be used in any store—especially since not all merchants carefully check the user's identification (ID). Further, if the ID was stolen along with the credit card—then even this level of security may be overcome.
Similarly, there are other methods resulting in fraudulent charges—even if the owner still possesses the credit card. For example, “skimming” is a technique of taking a credit card and sliding it through a “wedge” device, which reads and stores the information on the magnetic strip of the credit card. This can occur whenever the owner hands over the credit card to someone else who then briefly disappears with the card (e.g., a waiter in a restaurant). The information stored on this “wedge” device can then be used to make credit cards with the owner's credit card number. Charges with this type of counterfeit credit card may not be detected until the next billing cycle.
What is needed is a simple, cost-effective, higher form of security on a credit card that is capable of significantly reducing, if not eliminating, common types of credit card fraud.